Hello, I am a law student. I would like to respond to your suggestion about piercing the coporate veil. To my knowledge, it is totally legitimate to restrict financial loss and liability by establishing a subsidiary, as long as there is no fraud involved in it. For example, HIT transfers its asset back to the holding company prior to the liquidation and leave no no enough asset for severance pay.

That is to say, if HIT no longer owes its employees payment, the court won’t pierce the coporate veil, even if Li Ka Shing is the legal owner of HIT.

What is the most important to me is that, even if Warrant (和黃) and HIT are in fact one single economic unit, or the coporate veil is finally pierced, it seems they are irrelevant. Because there is nothing Warrant or HIT should have done for the employees. For example, the salary is above the minimum wage. What else could be expected of Warrant or HIT?

Please forgive for not being able to provide relevant cases and my inability to type Chinese.

The following is a case about the criteria of piercing the corporate veil:

In China Ocean Shipping Co v Mitrans Shipping Co Ltd (1995), it was held that the court is not entitled to life the corporate veil merely because the corporate structure has been used to ensure that certain liabilities fall on another company within the group.

Not exactly. The point with piercing is that the economic unit is try to avoid some serious liabilities that it itself should be held responsible. Fraud is merely an expression of which, and tort liability, the infringement of rights are other possible alternatives. As long as there is abuse of the limited liability privilege, there is ground for piercing. The issue here is that there is a possibility that Hutchison uses its limited liability privilege to avoid dealing with union members so when negotiation comes, the unions can find no effective remedies, let alone the right person to negotiate with. On top of that, it is wasting good public resource by nullifying attempts of mediation. This is an infringement of rights right there, and of course abuse. Hutchison can be shown to be doing this in bad faith, provided that there is evidence. The limited liability clause is creating inequality, unfairness and injustice. As a law student, do you think that would be your duty to fix that?

Furthermore, why do we need to limit our discussion on what is being said in a case? Piercing the corporate veil exist as a legal concept and the court can expand the application of which to catch up with modern corporate practices. A court can set a precedent and expand the interpretation of the law any time. That’s what it is there for. Many economists are calling for more liberal use of the piercing and I happen to side with them because they are scientists and they care about fairness and justice a lot more than most of the lawyers I know.

In addition, it doesn’t even matter if the court doesn’t allow that. As strategy goes, the union would win either way because they can show the law is the source of injustice now. “Poverty is the parent of revolution and crime," said Aristotle, if the law continued its way as you suggested, it would become the adulterer in the above relationship.

First of all, before I study law, I has obtained a bachelor degree in economics. I am afraid not many economists (I know) care about fairness and justice. Most of them, ranging from high school teacher of economics to university professors, are more concerned with deregulation and tax regulation. A teacher even expressed his contempt to Paul Krugmen when I was studying my bachelor degree. But it may be a matter of exposure to different social circles.

Second, I am not learned enough to determine whether the corporate veil should be lifted. But from what I learn from company law, I think judges need good reasons to expand the application as it may involves depature from precedents. For example, if the court pierces the corporate veil, what remedies would be available to the workers such as collective bargaining? If Li Ka Shing were forced to deal with the workers directly, but the results would have been no difference from as HIT deals with the workers, why would the court do so? It is not uncommon for the judge to express his symphaty to the claimant but rule against him.

What I am concerned here is the probable verdict and the effect of it. The duty of imporving the working class’ livelihood should be vested in the executive and legislative branch.

First of all, I’d refrain from listing economists who care about fairness and justice, but Joe Stiglitz, Amatarya Sen, Dani Rodrik, Robert Shiller, Christina Romer, George Akerlof, Peter Diamond, Adam Smith, Paul Samuelson, John Maynard Keyne et al. come to mind. On the other hand, we have lawyers like yourself coming out to announce principles of fairness and social justice are of no concern to the court. It is not about who has heard what anymore, because we can see first hand that I’m right on the money with you coming out to prove that very point for me.

Second, lifting the veil would reduce the waste of time in nonconstructive negotiations and shorten the strike, which is being conducted at the expense of the workers and other creditors alike. Furthermore, it prevents the employer(s) from handling the strike and union members unfairly, and/or transferring assets in order to avoid their responsibilities. Did you read the news, which I linked, that a service provider just decided to fold out of the blue simply because of a strike? If that does not raise any suspicion in you, then I’ll have to say you are a very naive lawyer student. Yes, it is rather uncommon to allow the piercing of the veil, and it was rather uncommon for the court to free the slaves in the US before the Civil War either. I fail to see your point.

Yes, let the executive and legislative branches to do their job. How nice! Isn’t it the best catch-all excuse for any inaction on part of the court? You want to end racial discrimination? “Let the administration and legislators work on it, for it’s none of my business", said the judge who was at one point a law student. I’d agree with you if the judiciary operates in a vacuum and does not need to consider the issue of social justice. And need I to remind you that the consideration of which is its very job, and without which it has no reason to exist or calling itself a just arbitrator? And did I say anything about “improving the workers’ livelihood"? No, I said “let the court extends the practice of piercing the corporate veil, so that the law would be more fair and up-to-date". Do not in anyway confuse the two.

I am a little surprised that you try to take side for me out of what I thought was a simple, but by no means easy, legal principle that I took into consideration.

Things would have been easy if you could change society with a verdict. Even if the judge wants to pierce the corporate veil as eager as you are, He or she has to consider other effects that are likely to emerge, such as the position of subsidiary companies. The use of subsidiary companies would probably become a nullity.

The easiest way is not necessarily the best way. And self-constraint is not necessarily inaction. Imagine what the legal system would be if a judge could make a decision only out of what he thinks is just and disregard the judiciary system. An extreme conservative judge could also exercise his discretion to make a decision to realize his idealistic or political goal. I guess you heard the term “palm tree justice".

Furthermore, I read the news you attach here. And I also notice that “旗下逾七成員工罷工的外判商高寶…將按勞工法例遣散約170員工。" The outsourced company would be very stupid to do something illegal at this moment. And I am afraid my suspicion is of no value.

Finally, as much as I appreciate your knowledge, analysis and conviction to pursue justice, I also resent your attempt to drawing any conclusion from my “ulterior intent".

Look, you have got to start reading more carefully before responding, and you need to respond to what I said, not what you think I said. I applies the same principle myself and have merely pointed out that you made no reply to the point about the principles of fairness and justice, so I assume you have none of those until I see otherwise.

Second, why are you so hung-up on “changing society", an idea that I’ve never mentioned in my above responses. I said, and I have already repeated it to you once, the issue is about updating the law so it catches up with modern corporate practices, so the law can serve the society.

Why are your imaginary judges so dumb and stupid that they cannot extend the practice while maintaining a reasonable boundary? When they made up the requirement of fiduciary duty in tort, did they nullify all individuals’ freedom? When they applied the principle of fair contract, did they abolish the freedom to contract at one stroke? Do I need to go on with examples?

And which part of “abusing the privilege of limited liability" you don’t understand? As long as a company doesn’t abuse it, that it does not abuse its structure to produce harms directly or through negligent, it can have as many subsidiaries as it wants. Where does the law say “privilege of limited liability" should be upheld at any cost? Or the privilege of limited liability is above other interests? And you, as a law student, cannot contribute any suggestion with which the court can apply the rule justly and prudentially? I’ll have to ask, what on earth are you studying?

According to bankruptcy law, the employees are among the third tranche of creditors to claim the company’s assets, which means they would get nothing if other creditors get to the assets first. There is a great risk of reallocating the assets to avoid the claims. Why, HIT and 高寳 entered into a contract and HIT has seniority in its claims, so HIT could get a large trunk of 高寳’s assets and leave nothing for the others. If HIT and 高寳 act as a single economic unit, then it is defrauding other creditors. That’s why I recommended a Ch. 11 to check it. Do I need to go on?

No, I didn’t draw any conclusion from your “ulterior intent”, if you have any; I merely pointed out your lack of principles, critical thinking skills, and understanding of reality.

I do not try to embroil in discussion/argument for something I am not familiar with. From the development of this discussion, I can see sentiment is escalated. Could I suggest perhaps we should cool down a little bit in the use of language, agreeing or demurring? I had similar experience with a reader before and I threw out a finality card in the end. Please open the horizon of the way we see the world instead of opening fire, friend or foe. I just want to share my experience for something I did and on reflection regretted my original approach.

Thanks Bill. I was thinking perhaps I was too harsh even before I finished my post. I do expect and would encourage him/her to come back at me fully, but this time with a better thought out argument.

Needless to say, it got me a little unsettling, even though I fully expected this kind of response, because I have heard this argument times and times again. I had law professors telling me the exact same thing. It is always the same “my hands are tied" attitude to justify inaction and status quo. A simple fact is that while judges may go overboard from time to time with their brand of justice, it is the duty of the legal scholars to come up with better approaches, so that the law would improve. What is the point of “studying" if all we do is to read old books and memorize what is already said by a bunch of old or dead people?

It is rather sad to see the legal profession has not improved, nay, decided not to improve, satisfied with its complacency. Have we not seen the same problem in Bhopal before? That was 30 years ago, and the victims are still awaiting justice. All law classes speak profusely of fairness and justice, how come there is such a huge gap between the talk and the practice? Why give up the principles of fairness and justice when pressed and go with “there is nothing the law can do"? India just sort of disregarded the TRIPS rules with its recent ruling on generic drugs, so there is always something we can do.

Now, I’m fully aware that I can be wrong, and I have already said that HK court would probably not accept my argument here. But whether it would and whether it should are two different questions. So, to start over, let me say that I was a bit unfair to the commenter as I knew what he/she was going to say and acted upon this knowledge. As for the commenter, just think and read carefully and critically, then produce a consistent response and don’t repeat what has been told to you in school. I harbor no hard feeling against those who disagree with me.